EPA has released its long-awaited proposed CERCLA financial assurance regulations for the hardrock mining industry. When finalized, these regulations will serve as a model for financial assurance regulations for other industries. Also on December 1, EPA provided notice that its next target industries – petroleum and coal products manufacturing; chemical manufacturing; and electric power generation, transmission, and distribution. These developments have major implications for a multitude of companies—both in these industries and in industries that could be future targets.
Here are some initial takeaways:
Financial Assurance Amount
The proposed rule requires financial assurance for three types of costs associated with releases and potential releases of hazardous substances: 1) response costs; 2) health assessment costs (at a fixed amount of $550,000); and 3) natural resource damages (an additional 13.4% of the total response costs). Under the proposed rule, EPA will apply a formula to calculate the amount of financial assurance. The response cost component is a sum of amounts based on site features, as outlined in the regulations (e.g. an open pit, operation and maintenance, and/or water treatment). The formula also factors in EPA oversight costs and a state adjustment factor – which vary based on the EPA Region and state in which the site is located. The formula also allows for downward adjustments for “environmentally-protective practices,” listed in the regulations. The financial assurance has to be recalculated, by an independent third-party, every 3 years and within 60 days of a successful claim against an instrument.
Financial Assurance Submissions
The proposed rule requires electronic submissions of financial assurance. This, in addition to the ability to combine sites—even across Regions—on one instrument, provides administrative efficiencies and will ease the financial assurance submission process. However, electronic submissions are easy for EPA to track and review, which is likely to increase enforcement oversight.
The eligible instruments are similar to those allowed under RCRA:
- Letter of credit + standby trust
- Surety bond + standby trust
- Insurance + standby trust
- Financial test
- Corporate guarantee
- Trust fund
Note that under the draft rule, the use of an insurance policy now requires a standby trust. This requirement is unique among environmental financial assurance regulations and has the impact of negating substantial cost savings typically recognized through the use of an insurance policy alone. While the draft regulations as written allow for captive insurance and risk retention group (RRG) coverage, EPA is requesting comments on whether to allow these mechanisms. In the preamble EPA lists several concerns, based on reports almost a decade old, making this issue ripe for industry comment.
The rule has not yet been published in the Federal Register, and comments will be due 60 days after publication.
For more information on how the proposed Financial Responsibility Requirements under CERCLA § 108(b) for Classes of Facilities in the Hardrock Mining Industry may affect you, please contact Elise Paeffgen or any of the other members of our Environment, Land Use & Natural Resources practice team.